Builder confidence in the market for newly built, single-family homes in May fell one point to 45 from a downwardly revised April reading of 46 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
“After four months in which the HMI has shown little signs of fluctuation, it is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery,” says Kevin Kelly, NAHB chairman and a home builder and developer from Wilmington, Del. “However, builders expressed some optimism that sales will pick up in the coming months.”
Adds NAHB Chief Economist David Crowe: “Builders are waiting for consumers to feel more secure about their financial situation. Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence.”
The index’s components were mixed in May, NAHB adds. The component gauging sales expectations in the next six months rose one point to 57 and the component measuring buyer traffic increased two points to 33. The component gauging current sales conditions fell two points to 48.